NCLT Ahmedabad Rejects Time-Barred Voluntary Insolvency Plea By Personal Guarantor, Flags Attempt To Stall Recovery

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has dismissed a voluntary insolvency application by a personal guarantor (Section 94 of the Insolvency and Bankruptcy Code, 2016), holding that the plea was barred by limitation and filed with the intent to stall recovery proceedings under the SARFAESI Act.

The bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma observed:

“The timing of the present application, coupled with the fact that the Personal Guarantor has approached this Tribunal after initiation and continuation of SARFAESI proceedings, clearly indicates that the present application has been filed only with the intent to avail the benefit of interim moratorium under Section 96(1) of the Insolvency and Bankruptcy Code, 2016 and thereby stall the recovery proceedings initiated by the Financial Creditor.”

The petition was filed by Prakash Kishorebhai Bindal, personal guarantor to Bindal Fashion Private Limited, seeking initiation of the insolvency resolution process against himself for a default amount of Rs 10,08,74,544.30 arising from a Deed of Guarantee dated August 16, 2017.

Bindal Fashion Private Limited had availed financial facilities of Rs 8.50 crore along with an additional Rs 1 crore from Axis Bank Ltd., which were secured by a personal guarantee executed by Bindal.

Following defaults, the loan account was classified as non-performing on December 29, 2021.

Axis Bank issued a recall notice on May 5, 2022, calling upon both the borrower and the guarantor to repay the dues. This was followed by a notice under Section 13(2) of the SARFAESI Act on November 11, 2022, and later an auction notice on February 19, 2025.

Bindal moved the Tribunal under Section 94 of the IBC thereafter. An Interim Resolution Professional was appointed, who submitted a report under Section 99 recommending acceptance of the application.

The bank opposed the plea, maintaining that the recall notice marked invocation of the guarantee. Since the application came only on January 17, 2026, it argued the claim was beyond the three-year limitation period. It also pointed to two earlier petitions filed in March and November 2025 that were not disclosed.

The Tribunal accepted this objection. It held that the recall notice triggered the cause of action, and limitation expired on May 4, 2025, making the present filing time-barred.

It also declined to rely on communications exchanged in 2023 to extend limitation. Referring to Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal, the bench noted that such exchanges do not extend limitation unless they amount to a valid acknowledgment under Section 18 of the Limitation Act.

On the conduct, the bench found that the application had been filed to stall the recovery proceedings.

“In the present case also, the surrounding circumstances clearly demonstrate that the present application has not been filed for the purpose of insolvency resolution but only as a device to obstruct the recovery proceedings initiated by the Financial Creditor.”

The Tribunal also relied on the decision in Syed Sirajis Salikin Khadri v. Edelweiss Asset Reconstruction Company Ltd., holding that petitions filed to derail recovery proceedings amount to abuse of the insolvency framework.

On suppression of material facts, the Tribunal noted that Bindal had filed two earlier Section 94 petitions which were not registered due to defects and had not disclosed these filings in the present proceedings. The non-disclosure was held to amount to suppression of material facts.

Accordingly, the tribunal dismissed the petition and imposed a cost of Rs 2 lakh on the personal guarantor..